Louis Dreyfus Company records a rise in its first half profits of 2020 as it adjusted price volatility

NETHERLANDS – Louis Dreyfus Company (LDC), an agricultural commodity merchant, has announced a rise in its first-half profits as it adjusted to price volatility and shifts in food demand during the coronavirus pandemic.

The company also reported a decline in its equity as it paid out a dividend to shareholders led by chairwoman Margarita Louis-Dreyfus.

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LDC said first-half group net income reached US$126 million from US$71 million in the year-earlier period, while core earnings before interest, tax, depreciation, and amortization (EBITDA) from continuing operations rose to US$634 million from US$423 million.

The group said demand for food commodities held firm and it was able to adapt to consumption patterns such as more at-home coffee drinking, while price swings allowed it to capture profit margins.

Cotton and biofuel, however, were affected by a drop in demand due to lockdowns, it added.

LDC’s improved interim profits came after a slide in earnings last year blamed on international trade tensions and a swine fever epidemic in China.

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The group’s recent focus on food innovation and the consumer end of the supply chain, like other crop merchants, would not replace its trading base which was vital for profitability.

First-half profits were curbed by a US$74 million decrease in the fair value of its shares in Luckin Coffee, the Chinese coffee chain hit by an accounting scandal, as well as an US$83 million negative currency impact mainly linked to the Brazilian real, the group said.

LDC paid a US$302 million dividend during the first half, which combined with a negative impact from financial hedging instruments, lowered group equity to US$4.5 billion on June 30 compared with US$4.8 billion on Dec. 31, 2019.

Deputy Chief Executive Officer Michael Gelchie, who will succeed retiring CEO Ian McIntosh on Oct. 1, said he was “optimistic” for the rest of the year and that the effects of a cost-savings programme would be seen in LDC’s full-year results.

Like rival merchants Archer Daniels Midland Co ADM.N and Bunge Ltd BG. N in their second-quarter results, LDC highlighted brisk Chinese demand for Brazilian soybeans.

The 169-year-old group is considering bringing in an outside investor for the first time with Bloomberg reported this month that LDC was in talks to sell a stake to Abu Dhabi investment fund ADQ. This is after Louis-Dreyfus said in January she could sell a sizeable non-controlling stake.

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